Environmental Governance in Oil-Producing Countries: The case of Peru

1. Environmental Governance in Oil-Producing Countries: The case of Peru EleodoroMayorga Alba Consultant Laub & Quijandría Ass. LAC SPE meeting - Lima , Dec. 2010

2. Petroleum Governance Initiative - PGI • The PGI is a joint effort of the Government of Norway and the World Bank to provide assistance to oil-producing countries aimed at an effective sustainable management of oil and gas development. • The PGI carried out a survey on environmental governance in 2008 to determine how governments in these countries are addressing the environmental impacts of the industry.

3. Survey Purpose • To establish and evaluate the key elements of environmental governance that a government of an oil and gas producing country should have in place. • To survey oil producing countries (27) and evaluate their performance against a benchmark template of environmental governance. • To propose recommendations that can guide improving a country’s capacity to manage oil and gas impacts. The survey will help determining the ‘starting point’ and ‘main gaps’ of a given country.

4. Environmental GovernanceThemes for a questionnaire • Legal, regulatory, and contractual framework. • Institutional structure and governance capacity. • Public consultation • EIAs, including practices beyond the approval stage. • Environmental monitoring and follow-up • Regulatory enforcement • Barriers to information disclosure, and dissemination • Use of best environmental practices and technologies • Decommissioning, abandonment, and liability costs. • Risk avoidance and management.

5. Benchmark Countries • A benchmark template based on selected countries was created representing an ideal “governance” structure. • Indicators for selecting the benchmark countries: (i) High industry environmental standards; (ii) Easy access to country data and high-level contacts; (iii) A mix of developed and developing countries • Five benchmark countries identified: Brazil, Canada, Italy, Malaysia and Norway

6. Surveyed Countries

7. Scorning of responses • Responses from surveyed countries were tallied compared to the benchmark template, and scored as follows:

8. Analysis of Survey Results:The case of Peru

9. The Legal, Regulatory and Contractual Framework World-wideproducingcountrieshave a framework…!

10. The Framework should … • Allow investments in compliance with environmental regulations. • Include environmental governance principles (using an appropriate system of penalties or incentives). • Provide rights to safeguard the property, health and environment of indigenous communities. • Provide mechanisms of prevention and solution when disputes among the stakeholders emerge. • Include specific environmental policies for oil and gas industries in different geographic settings. • Restrict projects in parks and protected areas

11. Peru’s framework is better than the LA average

12. However, Peru lacks… • A specific environmental law and a complete set of regulations for oil and gas operations. (ii) An effective system of incentives to ensure compliance. (iii) Regulations obliging foreign companies to equally respect their home country regulations, and, (iv) Identification of “no-go” zones.

13. A good management system should include… • Specialized institutions for the oil and gas sector which work with clear objectives and mandates for environmental and social management; and sufficient resources to fulfill their objectives.

14. Resources are often missing! In mostproducingcountriesthegovernmentenvironmentalinstitutions are weak

15. Institutions and their Governance Capacity in LA

16. What does Peru need to improve? • Set-up an efficient Evaluation and Fiscalization Environmental Office (OEFA). • Achieve a good coordination between the OEFA, OSINERGMIN and the MEM-General Direction of Environmental Issues (DGAA). • Upgrade the qualifications of the professionals in these institutions. In general, their personnel are, not receiving an appropriate remuneration; salaries remain below the industry levels.

17. Preparation and approval of EIAs • Environmental Impact Assessments (EIAs) require processes for preparing, approving and also for monitoring the implementation of agreed environmental plans, throughout the life of the projects.

18. EIA focus is in approval

19. How EIAs work in LA? • EIAs in all LA countries are mandatory for all activities in the phases of exploration, development, and production. • EIAs in general comprise: • A base line • A definition of impacts • Socioeconomic, biophysical, and cumulative impacts. • Qualitative and quantitative estimations of environmental effects (water, soils, air, vegetation and wildlife).

20. Improving EIAs beyond the Approval Stage

21. How EIA’s work in Peru? Main deficiencies are: • a strict time line and a good definition to categorize impacts are required to establish reasonable ToR for EIAs, including review processes respected by all stakeholders; (ii) the regulation of land use policies. (iii) the making of good consultations a mandatory requirement for new oil and gas development.

22. What is required in the EIAs monitoring and follow-up? • Monitoring must be undertaken by responsible government authorities and independent agencies. • The information of the monitoring results must be disclosed to all stakeholders. • Developing an environmental information system open to all publics is a good governance practice

23. Eliminating Barriers to Information is critical! • Make environmental management information accessible to all people through information dissemination policies that consider language, culture, and vulnerable or disadvantaged groups and indigenous populations.

24. Poor Env & Soc information systems Consultation world-wide still has a long way to go; Governments generally choose to inform rather than involve.

25. Peru appears better than the LA average

26. However in Peru… • Responsible institutions do not have a disclosure policy and enough resources to make this information accessible to all stakeholders. • A law for prior-consultation has not been finally adopted

27. Liability is a Big Gap In half of the countries surveyed, governments pay little attention to liability and decommissioning of field facilities

28. Future Liability, Clean-up and Reclamation Costs

29. Why is it deficient in LA and Peru? • It’s unusual for companies to submit plans or comply with the requirements (soil and sea) established for decommissioning and abandonment. • There is a lack of procedures for dealing with the liabilities from oil and gas facilities that have no owners

30. Concluding Remarks • Peru has developed a sufficiently appropriate environmental policy and legal framework. • However, regulations and EIA procedures have to be refined, in particular those related to prior-consultations and monitoring. • Efforts need to be made to increase the capacity and coordination of key institutions. • A closer attention should be paid to liability costs and to an effective decommissioning of oil and gas facilities.